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Baseball success and the structure of salaries

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  • Donald Richards
  • Robert Guell

Abstract

The purpose of this research is to examine some competing assumptions regarding the hiring behaviour of major league baseball clubs. One hypothesis is that owners and general managers of teams enter the free agent market with a view to attracting the best talent available in order to win games. We might refer to this as the 'win games' strategy. A potentially alternative view is that they compete in this market for marquee players who will attract paying customers to the ball park. We can refer to this as the 'fannies-in-the-seats', or revenue, strategy. While these hypotheses are not necessarily inconsistent, we can imagine that for some teams, at some times, they are alternative approaches to hiring behaviour. A team committed to the 'win games' strategy may attempt to spread its resources in order to hire as many good players as possible without necessarily hiring elite players. A team committed to the revenue strategy may be content to surround a superstar with second rate talent. In order to test these hypotheses we intend to specify estimable models that relate, alternatively, team attendance, winning percentage and division, pennant and world championships to, among other relevant explanatory variables, its salary structure.

Suggested Citation

  • Donald Richards & Robert Guell, 1998. "Baseball success and the structure of salaries," Applied Economics Letters, Taylor & Francis Journals, vol. 5(5), pages 291-296.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:5:p:291-296
    DOI: 10.1080/758524403
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    References listed on IDEAS

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    1. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64(3), pages 242-242.
    2. Kahn, Lawrence M, 1993. "Free Agency, Long-Term Contracts and Compensation in Major League Baseball: Estimates from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 157-164, February.
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    Cited by:

    1. Robert Breunig & Bronwyn Garrett-Rumba & Mathieu Jardin & Yvon Rocaboy, 2014. "Wage dispersion and team performance: a theoretical model and evidence from baseball," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 271-281, January.
    2. Tao, Yu-Li & Chuang, Hwei-Lin & Lin, Eric S., 2016. "Compensation and performance in Major League Baseball: Evidence from salary dispersion and team performance," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 151-159.
    3. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Wage Dispersion and Firm Productivity in Different Working Environments," British Journal of Industrial Relations, London School of Economics, vol. 49(3), pages 460-485, September.
    4. Yamamura, Eiji, 2010. "Wage disparity and team performance in the process of industry development: Evidence from Japan’s professional football league," MPRA Paper 27363, University Library of Munich, Germany.
    5. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "La dispersion salariale stimule-t-elle la performance d'une firme ?," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 63-70.
    6. Eiji Yamamura, 2015. "Wage Disparity and Team Performance in the Process of Industry Development," Journal of Sports Economics, , vol. 16(2), pages 214-223, February.
    7. Takuma Kamada & Hajime Katayama, 2014. "Team performance and within-team salary disparity: an analysis of nippon professional baseball," Economics Bulletin, AccessEcon, vol. 34(1), pages 144-151.
    8. Benno Torgler & Sascha Schmidt, 2007. "What shapes player performance in soccer? Empirical findings from a panel analysis," Applied Economics, Taylor & Francis Journals, vol. 39(18), pages 2355-2369.
    9. Egon Franck & Stephan Nüesch, 2007. "Wage Dispersion and Team Performance - An Empirical Panel Analysis," Working Papers 0073, University of Zurich, Institute for Strategy and Business Economics (ISU).
    10. Nils Braakmann, 2008. "Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data," Working Paper Series in Economics 77, University of Lüneburg, Institute of Economics.
    11. Caruso, Raul & Carlo, Bellavite Pellegrini & Marco, Di Domizio, 2016. "Does diversity in the payroll affect soccer teams’ performance? Evidence from the Italian Serie A," MPRA Paper 75644, University Library of Munich, Germany.
    12. Annala, Christopher N. & Winfree, Jason, 2011. "Salary distribution and team performance in Major League Baseball," Sport Management Review, Elsevier, vol. 14(2), pages 167-175, May.
    13. Szymanski, Stefan & Wilkinson, Guy, 2016. "Testing the O-Ring theory using data from the English Premier League," Research in Economics, Elsevier, vol. 70(3), pages 468-481.
    14. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Does Wage Dispersion Make All Firms Productive?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(4), pages 455-489, September.
    15. Rodney J. Paul & Andrew P. Weinbach, 2011. "Minor League Baseball Attendance in the Pacific Northwest: A Study of the Effects of Winning, Scoring, Demographics and Promotions in the Northwest and Pioneer Baseball Leagues," Ekonomika a Management, Prague University of Economics and Business, vol. 2011(2).
    16. Carlo Bellavite Pellegrini & Raul Caruso & Marco Di Domizio, 2021. "Relative wages, payroll structure and performance in soccer. Evidence from Italian Serie A (2007-2019)," DISCE - Quaderni del Dipartimento di Politica Economica dipe0015, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    17. Rodney J. Paul & Charles Garrett & Cody Barbuto & Kyle Liotta, 2019. "Celebrity attraction in the minors: the case of Tim Tebow," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(4), pages 795-812, October.
    18. Anna Bykova & Dennis Coates, 2020. "Does Experience Matter? Salary Dispersion, Coaching, And Team Performance," Contemporary Economic Policy, Western Economic Association International, vol. 38(1), pages 188-205, January.
    19. Tyler Anthony & Tim Kahn & Briana Madison & Rodney Paul & Andrew Weinbach, 2014. "Similarities in fan preferences for minor-league baseball across the American Southeast," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(1), pages 150-163, January.
    20. Gee San & Wen-Jhan Jane, 2008. "Wage dispersion and team performance: evidence from the small size professional baseball league in Taiwan," Applied Economics Letters, Taylor & Francis Journals, vol. 15(11), pages 883-886.
    21. Hajime Katayama & Hudan Nuch, 2011. "A game-level analysis of salary dispersion and team performance in the national basketball association," Applied Economics, Taylor & Francis Journals, vol. 43(10), pages 1193-1207.
    22. Marco Di Domizio & Carlo Bellavite Pellegrini & Raul Caruso, 2022. "Payroll dispersion and performance in soccer: A seasonal perspective analysis for Italian Serie A (2007–2021)," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 513-525, July.
    23. Dennis Coates & Bernd Frick & Todd Jewell, 2016. "Superstar Salaries and Soccer Success," Journal of Sports Economics, , vol. 17(7), pages 716-735, October.

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